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MGM101H5 (354)
Chapter 3

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Dave Swanston

Chapter 3 – What is Business? The Big Picture - System of integrated actions to ensure organization develops and grows market for its goods/services and creates value (wealth) on behalf of stakeholders - Commercial Endeavours; refers to markets the organization serves, products and services it offers, needs it professes to meet in the marketplace - Employee Interaction; refers to value-creating skills an organization’s employees brings to marketplace (success of organization lies within labour force) - Organization Efficiency and Structure; reflection of complexities of business activities that circulate within organization - These three when combined, result in understanding of business system, result in Business Foundation What is Business? - Business; refers to mission-focused activities aimed at identifying needs of market, and development of solution to such needs through acquisition, transformation of resources, to be delivered to market for profit - Assets; refers to infrastructure and resource base of organization o Includes; land, buildings, bricks and mortar, equipment - Labour; refers to human resource requirements of business - Capital; refers to money needed by organization to support asset-based expenditures, and invest in development of new products - Managerial Acumen; refers to foresight, drive, knowledge, ability of organization’s key individuals – owners and top-level managers - Business-model system; operational platform or structure that business uses to generate revenue - Assets + Labour + Capital + Managerial Acumen = Business Model Composition - Business owner conduct “strategy and 3C assessment” (capabilities, competencies, capacity) - 3C assessment o Analyzing resources available to organization, capabilities and competencies it possesses, defines capacity of what organization can and cannot do - Strategy; specific objectives of organization - Competitive Advantage; advantage an organization has over its competitors that enables it to generate more sales, achieve greater margins, achieve lower cost base, or attract and retain more customers - Strategy and 3C Assessment -> Business Plan Development -> Business Plan Execution -> Company Performance and Profitability -> Company Growth and Reinvention - Role of business owner/management team is to anticipate, sense opportunity to create product and deliver to targeted customers - Businesses grow by executing series of planning cycles over time - SMAC = specific, measureable, actionable, controllable - Declining of revenue, or reduction in profitability are key identifiers whether plan is working or not - Failure to meet objectives of planning cycle can be result of poor positioning, poor operational execution, or both - For-Profit Companies; organizations whose objective is profitability and wealth creation on behalf of stakeholders - Not-For-Profit Companies (NFP); organizations whose objective is to deliver service to communities they serve via a model of collective interest and social goals o Still need a business plan, operating model, business system Fundamental Objectives of Business - First (short-term profit); profit on monthly, quarterly, etc. basis is fundamental to ensure immediate survival - Second (long-term growth and profitability); set in motion ability of organization to achieve long-term growth and profitability - Third (social and environmental responsibility); social and environmental responsibility o Green initiatives, truthful ads, environmentally friendly - Firms need to make decision that enable all three responsibilities to be considered equally Business Model and Profitability - Profitability used for comparing how well company is performing in comparison with competitors Difference between Profit and Profitability - Profit; the “bottom line” result an organization has realized for an identified, immediate period of time (Total Revenue – Total Expenses = Profit) - Profitability; measures how well company is using its resources over period of time to generate earnings o Corresponds to efficiency and effectiveness of organization to use its a
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